Careers at Allen Austin - History & Perspective
Allen Austin has successfully completed consulting engagements for clients that span a vast array of companies, public and private, start-up to well-established, not-for-profit organizations, educational institutions and more. Allen Austin delivers high impact consulting to our clients to enhance efficiency, revenue growth, profitability and enterprise value. We provide leadership advisory, assessment, and board services. With expertise across all functional areas, Allen Austin assists management in critical areas such as service, operations, mergers & acquisitions, strategy and organization. We are passionate about delivering real and sustainable results. Please contact your practice leader for more information on how Allen Austin can assist you.
For those entertaining a career in executive search in general, and ALLEN AUSTIN specifically, there is much to consider. In this piece we will examine the search profession as a whole, the current environment, both in terms of market conditions, competitive activity, your own personal considerations, and whether or not we are the right firm for you. Let's first address the issue of whether or not the executive search profession is right for you.
We will start by discussing our profession's history. The search profession, as profession's go, is among the youngest in the world. The industry was actually born in 1945, shortly after the end of World War II. During the war, America's executive ranks were seriously depleted by the war effort. As most of you over the age of forty-five are already aware, America sent tens of thousands of talented people to war, many of whom would have otherwise served or continued to serve as business executives and/or professionals. Instead, these talented professionals were sent to the European and Pacific Theaters of Operations in order to protect our freedom. Unfortunately, 540,000 did not survive, many retired after active duty, and some chose to remain in the military. The ultimate result was a severe shortage of middle level and executive talent.
The search profession originated as a direct result of the need to re-staff private industry with management talent. The earliest search consultants worked almost exclusively on a contingency basis, with flat fees and percentage fees between 10 and 20%. The industry itself, and the consultants that pioneered it, had very low credibility and fees were paid, begrudgingly, to those who could produce viable candidates for critical openings.
As the industry progressed, in the sixties and seventies, many became aware that executive search was, potentially at least, a very lucrative business. The industry was gaining in prominence and prestige, fees were rising, and the industry began to attract business professionals who had been successful in other forms of industry. It was during this era that some of the largest and most prestigious search firms were born.
It was also during this era that firms and individual consultants began to differentiate themselves. As stated earlier, virtually all search in the early days was performed strictly on a contingency basis, meaning that the firm or consultant was only paid if a candidate was produced by the procuring firm or consultant, and hired.
Many of the largest contingency-based organizations were born during this period. Management Recruiters International (MRI) was born during this time frame and has grown to become the largest contingency search organization in the world. Countless others, most of whom have attempted to clone MRI's system could be sighted. Many of these firms are largely franchise-based. Organizations such as MRI sought out individuals seeking a business opportunity, and very simply sold them a system, in much the same way McDonald's sells restaurant franchises. Since that time, countless independents have adopted essentially the same style of system, and have grown, to varying degrees of success. A common thread runs through most of these firms.
The assumption of most of these organizations is that, to perform middle level search (and placement), it is not necessary to hire true professionals. For the most part, these kinds of organizations will hire anyone who demonstrates reasonable intelligence, drive, sales aptitude and a willingness to follow a specific set of rules. The rules include what time an individual comes to work, when they go home, when they go to lunch and with whom, how many phone calls they make in a given day, how much "connected phone time" they spend each day, how many candidates they present, how many interviews are arranged, how many face-to-face interviews are set, etc. A further assumption in most of these contingency firms is that the true value lies in the system itself, not in the individual consultant. These systems typically are comprised of video-based, cookie cutter styled training programs, and an intricate system of monitoring activities. The author of this piece, having bought and operated one of these firms, also knows that a common axiom or philosophy in this type of firm is: hire, extract production, and fire. Many of these firms promote an atmosphere and a management style in which the firm burns the consultant out. Most recruiters who are successful in this type of environment ultimately seek employment elsewhere, either with a higher quality search firm, or in the traditional industry segment.
On the other side of the coin, is the higher quality retained executive search consulting firm. As stated earlier, the executive search profession enjoyed relatively low prestige in the early days. By the mid 1990s, the perception on the part of senior level executives and board directors, in private and public industry, the academic world, the non-profit world and the professions had changed dramatically, and continues to change - to our benefit.
Reported worldwide search revenues have grown from $3.2 billion in 1993, to a record $16 billion in 2007. Worldwide retained executive search revenues are now projected to top $30 billion by 2015.
On the surface, one might reason that the economy has been the major factor in our growth. A closer examination reveals factors quite differently. Surely, the economic environment has not hurt us. The more compelling reasons for our growth are as follows:
Businesses in North America and recently, the rest of the world, have elected to operate in the "lean and mean" mode. Many of you have read the recent works of Peter Drucker and countless other renowned management consultants. The current and developing trends and therefore philosophies, which have been espoused and championed by virtually all leading businesses worldwide, advocate a philosophy of divesting firms of all apparent "fat," and, to the greatest extent possible, eliminate all redundancies and all possible fixed costs. Keep all costs variable based on revenues. Outsource everything possible.
The implications for our profession are clear. First of all, companies that used to maintain large recruiting and human resource departments have scaled back dramatically. Many have made conscious decisions to use search firms, on a project basis, rather than incur the fixed costs associated with maintaining significant in-house recruiting organizations.
The second implication should be equally clear. Succession planning, in many organizations is dead. In days gone by, many organizations employed (or under-employed) talented "rising super-stars." These stars would be hired based on their raw talent and learning ability, even if they did not have specific knowledge of the role they were originally hired to play. Typically, they would serve in some relatively menial role, awaiting the chance to take the place of the executive they would ultimately replace. Most companies employing this human resource strategy viewed their emerging stars as "bench strength." When the senior player departed or retired, the second string player took their place. Succession planning is a wonderful strategy and a spectacular luxury for the organization that can really afford it. Few can today. The demand on publicly held and venture-capitalized firms dictates that they be lean, mean, nimble and able to produce the expected results....now, not next quarter or next year.
Next, the loyalty factor is gone. The days in which an individual could expect to graduate from college or graduate school, and spend the rest of their career with one company are, for the most part, over. The fact is that many of our predecessors spent an entire career spanning forty or more years with one or two companies, and that an individual who changed jobs more often than once every twenty years or so, was viewed as a ‘job hopper." These days, it is perfectly acceptable to change jobs much more often. In the case of information technology professionals for example, one may change jobs every two years.
Companies have also had to come to grips with the loyalty factor. No longer can firms afford to commit to this type of loyalty. Technology and competition are changing so rapidly that many companies, even large ones, have recognized that a particular set of executives, while seemingly appropriate for today, may not be appropriate for tomorrow. New strategies and tactics will require an ever-changing work force.
Perhaps the most compelling and important reason for our industry's phenomenal growth is the realization among senior level managers and directors, that conducting a real search is money well spent. Let's face it. We are in the business of identifying, recruiting, qualifying and procuring the finest and most impactful players for our clients. We get paid large fees for procuring executives who make a real difference. More and more, our clients recognize the need for, and the value of, conducting a professional, comprehensive search for a major impact player, even if the company has an internal candidate in mind.
Let us examine, for an example, a search for a retail division president, one who is responsible for a $750 million unit of the company's business. Let's assume that the average compensation at this level is $300,000. Let us also assume that the fee for conducting this search, including expenses, is $100,000. The right division president, procured as the result of the right search, will make a positive impact equal to or greater than the cost of the fee to procure him or her, in the first month! In an impactful search, the cost of the search becomes literally insignificant over time, in most cases, over a very short period of time.
To sum things up, executive search has become one of most prestigious professions on the planet. Many have been drawn to our profession in recent years. Some have been enormously successful, irrespective of their lack of search background; others have not.
Let's now briefly discuss and review the different types of agencies, firms, and consultants.
An employment agency works on behalf of the applicant. It looks for jobs for people. Those seeking employment come to these agencies to see what positions the agencies' client companies may have open. As a result, the pool of applicants from an agency of this type is usually limited to those seeking new employment. The agency receives a fee from a company only when that company selects and hires a candidate sent by the agency.
With advertised selection, a company advertises in publications announcing a specific job opening and the necessary qualifications. Those interested respond by sending or faxing a resume. Again, the pool of applicants is limited to those seeking new employment. The value of advertising is that it identifies a broad range of candidates from both within and without a client's business sector and is an effective data-gathering technique.
A contingency search consultant's fee is paid only when the client actually hires a candidate presented by the firm. The most obvious advantage is that a client does not pay for services unless it hires an apparently suitable candidate presented by the recruiter.
In retained executive search consulting, the consultant works on behalf of the client company. For example, the search firm may conduct a search on behalf of a client seeking the right senior manager for a specific role. Typically, these candidates are not actively seeking new positions. It is the retained search firm's role to identify and interview candidates who may fit the culture and needs of that company, then to present a "short" list of those candidates to the client. The retained search consultant serves as a management consultant - providing objective insight and advice. Retained executive search consulting, done the right way, is a specialized form of management consulting. We are paid for the work we do and for what we know, not for creating a transaction. There are plenty of cases in which we are paid large fees for conducting searches that result in the promotion or selection of an internal candidate.
Everyone, yes everyone, involved in firms of these types, aspires to rise to the stature of Senior Level Retained Executive Search Consultant. Relative to the other areas of search, the world of retained search is by far the most difficult to enter. The only realistic option for most individuals aspiring to this stature is to join an established firm known for doing high quality retained search.
Another obstacle exists for most people. The vast majority of North America's retained firms hire only two types of people. The first type of person these firms hire is the bright, young energetic intern right out of business school. Most of the large retained firms show up at recruiting time on the campuses of the top twenty-five or so business schools, along with the likes of KPMG Peat Marwick, PriceWaterhouseCoopers, McKinsey & Co., Boston Consulting Group, etc. Polished recruiters from these firms will entice many of these bright young stars to join their firms. They will be paid a reasonable base salary, work ridiculous hours, perform all tasks that the senior level consultants view as boring, mundane or difficult, and perform every conceivable menial task, to the benefit of the firm and its partners. These young people typically sacrifice for five, six, seven or more years, hoping one day to become a partner, practice leader, rainmaker, in other words, a retained executive search consultant.
The second type of person most retained firms hire is the established rainmaker. This senior level search consultant walks in the door with an established book of business, sits down and starts making money. Most of these individuals will be offered some type of equity position; most will have to invest in their firm's stock in order to participate.